Foreclosures + Short Sales

Lenders Aren’t Moving REOs

In an earlier blog, I wrote about the inability of lenders that had completed foreclosures to timely put those homes back on the market. Under ordinary circumstances, a bank will put a “real estate owned” (or REO) home back on the market as soon as possible – often in 30 days. But only some of the many homes foreclosed on by the banks are being listed “for sale” in the Multiple Listing Service.

Real estate experts guessed that somewhere around 450,000 and 500,000 properties repossessed over the past year or so were not on the market. Fannie Mae and Freddie Mac confirmed last year that they were listing approximately 35 to 50% of the homes they own.

Recent reports from Fannie Mae appear to show a decrease in the number of foreclosed properties held. According to its most recent quarterly report, Fannie Mae acquired 98,428 homes through foreclosure during the first nine months of last year, and sold 89,691 REO properties during the same period. Looks like they are just about keeping up, right?

However, at the end of September 2009, Fannie Mae admitted that it still had 72,275 REO properties on its books, marking a 7% increase year-over-year numbers. So in reality in appears that this governmental related entity is falling behind in the processing and disposition of the homes it has acquired by foreclosure.

The delay in getting homes back in the system is especially apparent in localities where there are large numbers of “REOs” – such as our Phoenix/Scottsdale residential real estate market. And loans which end up foreclosed upon by small, non-Freddie Mac and Fannie Mae lenders are probably even more likely to be delayed due to their lack of adequate REO resources.

These time frames may increase due to the escalating rate of seriously delinquent single-family home loans. Fannie Mae’s monthly summary for November 2009 showed notable growth in seriously delinquent single-family home loans held or guaranteed by the company. Loans three or more months behind in payments or those in the foreclosure process soared to 4.98% in November 2009.

Obviously this increase will lead to more REO homes. And this also means that there will be continuing opportunities for buyers to purchase homes for cheap. If you are interested in exploring a purchase of a foreclosed home, let us know at to contact us or for more info.

– N. Mark Kramoltz © 2015

Foreclosures + Short Sales

Are Lenders Holding Back REOs?

In normal market situations, a bank will repossess a home and usually get it to a Realtor for listing in the local Multiple Listing Service in as short as 30 days. Therefore, in a relatively short period of time, virtually every marketable lender owned property (a REO) finds itself listed for sale on the local MLS.

Today, that doesn’t appear to be the case. As was mentioned in an earlier blog, it has been reported that lenders are not putting all the homes they acquire on the market at the earliest opportunity. It is thought that between 450,000 and 500,000 properties repossessed over the past year are still not on the market. For example, earlier this year Fannie Mae and Freddie Mac stated they were only listing about 35 to 50% of the homes they own.

Why would they do that with hungry buyers searching for housing bargains, and agents and brokers chomping at the bit ready to list and sell the properties?

Lenders have offered a number of reasons:

  • Many of the properties have title issues that need to be resolved.
  • Many of the properties are in states of utter disrepair.
  • A number of states have strict redemption-rights periods, which prevents the lender from reselling.
  • A few states have extended the length of eviction proceedings, and federal law has also provided that legitimate renters can stay in the property for a limited time after foreclosure.
  • There are too many to process – there will be roughly 10 times the number of REOs this year as in the last “normal” year (2005).

But there may be another factor that the banks don’t want to talk about. Lenders may be holding properties off the market in order to defer losses. For accounting and federal regulatory reasons, in most cases banks aren’t required to adjust asset prices until the actual resale of the property. If they resell at the expected low prices, suddenly their assets will be worth much less than the loans were valued at, which could force the feds to seize the bank.

In Maricopa County, Arizona, approximately 40% of homes sold in November were REOs, 40% were normal sellers, with the remaining 20% short sales. If the experts are right, the percentage of lender owned real estate may rise next year from its already high amount.

Want to take one of those foreclosed homes off a lender’s hands? Visit our foreclosure page at SimplySOLD Realty prepares a list of Scottsdale properties that have been foreclosed on by Freddie Mac and Fannie Mae. We also have access to lender owned homes all over the valley, so give a call or search for yourself on our website.

– N. Mark Kramoltz © 2015

Foreclosures + Short Sales Real Estate Facts & Figures

The Rules have Changed – Frustration in a Buyers’ Market (Part 1)

Arizona’s residential real estate market is schizophrenic right now – a dichotomy of healthy sales in some segments versus years on the market in others. The good news is that lower sale prices overall have allowed buyers once priced out of the market to enter the fray. The bad news is that the buying process can be frustrating – especially in affordable price ranges in desirable areas.

New buyers have entered into the market because homes are now listed at much lower prices than what they were sold at just a few years ago. In the Phoenix area, the median resale home price was $115,500 in April 2009, down from a peak of nearly $265,000 three years ago. Consequently, first-time buyers accounted for somewhere around one-third of all transactions.

In addition, interest rates are once again near to historic lows (5.03% in the second quarter of 2009). When you add the impending expiration of the $8,000 tax credit (on November 30, 2009), it is easy to see why there is so much buyer activity now.

The lower prices mean that in some price segments there are fewer homes available than in the recent past. For July in Maricopa County, approximately 32,000 homes were on the market, down 30 percent from January. In particular there are less properties for sale in the popular $160,000 – $100,000 price range, and the time on the market of properties for sale between those limits have generally decreased. Between $100,000 and $120,000, the number of active listings decreased in metropolitan Phoenix from 1323 in June to 1290 in July. In addition, the number of sales pending (a contract has been signed but the closing hasn’t occurred) decreased in many price points. For example, from 846 to 778 closed sales from June to July in the $120,000 to $139,000 price range.

This doesn’t mean that there are not distressed sales – lender owned properties (REOs) and short sales, in the sought after price ranges. Continuous waves of foreclosures affect all of metropolitan Phoenix and Scottsdale. In fact, approximately 87% of all recent sales have been of distressed homes. The difference is that when a desirable area and an affordable price range coincide, demand can exceed supply.

My next blog will detail the consequences to buyers of the multitude of distressed properties: short sales, pre-foreclosures (trustee sales initiated but not completed) and bank owned properties that are available. As you will see, “hurry up and wait, and wait some more,” is the new buyer reality. For more on this topic, and for answers to your real estate questions, keep visiting this blog and our website,

– N. Mark Kramoltz © 2015

Foreclosures + Short Sales Home Buying

Buyers are Increasingly avoiding Distressed Properties

Buyers have discovered that it is not necessary to purchase a distressed property to obtain a great deal these days. According to its November 2008 survey, Harris Interactive reported that the number of buyers willing to consider the purchase of a bank owned property or that from a seller needing lender permission (a short sale) has declined. In early summer 2008, 54% of buyers would put an offer in on an REO or short sale was 54%. In November, that amount had lowered to 47%.

The reason for the change is attributed to buyers realizing the down side to purchasing that type of properties. Hidden costs, poor home condition, the complications, uncertainty and delays inherent in short sales have made buyers more wary of distressed home. When sold by auction, the negatives to REOs increase, as there is ordinarily no or only a limited opportunity to conduct inspections or other due diligence before the sale, and that there is no contractual right to cancel after purchase afterwards if the property is unacceptable.

In an ordinary market, the price of distressed properties is adjusted downwards to the point that the benefit equals or exceeds the risks. Now there is not enough price advantage, especially when considering that there may be other properties available from traditional sellers at those same prices, to justify incurring that risk. That is why my advice is to avoid distressed homes at all costs when there is other suitable product available to non-investor buyers. For more information on the data in the Harris Interactive survey, go to

– N. Mark Kramoltz © 2015